NEW YORK (TheStreet -- Jaguar Land Rover is no longer a drag on Tata Motors (TTM), India's largest automotive company. A pick-up in demand for luxury cars a few quarters ago is changing JLR's financial profile, once mired in debt, inefficiencies and poor sales. A revival in volumes and higher profitability for JLR, accounting for more than half of the parent company's revenues, has swayed analysts to forecast a bull run for Tata Motors.

At 15 times EV per EBITDA, Tata Motors is trading at a premium, compared to other U.S.-listed players like Ford ( F - Get Report), Toyota Motor ( TM - Get Report) and Honda Motors ( HMC - Get Report). However, the growth in Indian commercial vehicle volumes, stabilization of JLR profitability, margin expansion in domestic business and decrease in leverage to strengthen the balance sheet position are key growth drivers for Tata Motors. Analysts predict 10%-15% upside in the stock from the present levels.

Surprising analysts, JLR volumes surged 25% on sustained demand, in comparison to last year's 55,000. Tata Motors benefited from the success of new models, notably Jaguar XF and the new variant of Range Rover. The pick-up in volumes was on improved realizations. For the quarter ended September 30, the average realization per unit was up 27.2% year over year and 7% quarter over quarter.

Enhanced demand is creating supply-side constraints. Although JLR is operating at near-100%, the waiting period for most JLR models is about 4 to 6 weeks. Management is working with suppliers like Ford for regularity in engine supplies and plans are afoot to set up assembly plants in India and China to overcome future bottlenecks.

Demand for luxury cars is still lagging in Europe, and the company's strategy to focus on other emerging markets is paying off. Demand for luxury cars in China and Russia is evolving. In fact, the shares of China and Russia in overall volumes rose nearly 10% and 6%, respectively, up 200 bps each, during the last two quarters. North American sales are pegged to grow from 20% at the end of 2010 fiscal to 21% during the second quarter of 2011. Analysts at Edelweiss Securities revised their earlier sales and net profit figures upward by 6.6% and 21.6%, respectively.

During a conference call, Tata Motors cautioned about higher commodity prices pressuring margins during the current quarter. However, the company believes that the effect will be more than offset by its better product mix and cost-containment initiatives. Analysts expect EBITDA margins at 16% for the full year, in line with the 290 bps and 110 bps jumps that saw margins touching 16.6% at the end of the Sept. 30 quarter.